AIA IPO goes live, a sector of AIG life insurance based in Asia

October 23rd, 2010 - this article is free to republish with open public license


The insurance company AIG has gone public with shares of AIA in a recent IPO.

In an effort to raise money, the insurance giant AIG has offered a portion of its business to the public. The sale has increased share value of the main company stock.

AIG is an American insurance corporation. Its corporate headquarters are located in the American International Building in New York City. The British headquarters office is on Fenchurch Street in London, continental Europe operations are based in La Defense, Paris, and its Asian headquarters office is in Hong Kong. According to the 2008 Forbes Global 2000 list, AIG was once the 18th-largest public company in the world. It was listed on the Dow Jones Industrial Average from April 8, 2004 to September 22, 2008.

The pricing of the initial public offering, set to be the world’s third biggest, comes as new listings proliferate in Asia. It puts an end to a long-running saga for American International Group, which tried and failed to sell AIA to Britain’s Prudential (PRU. L) earlier this year.

AIG plans to use some of the proceeds of the AIA sale to pay back part of the $182. 3 billion bailout that it received from the U. S. government during the financial crisis.

The successful sale made AIG the top gainer among U. S. insurance shares on Friday, adding more than 2 percent.

AIA said on Friday that the IPO was priced at HK$19. 68 each and that it exercised its upsize option. If the underwriters exercise the overallotment option, the IPO size would rise 15 percent to $20. 5 billion. AIA’s will start trading on October 29.

“Investors did not dare to miss this jumbo deal as the market has ample liquidity and the sentiment is very strong,” said Antonny Cheng, a fund manager at Gain Asset Management.

AIA has been in Asia for more nearly a century, and has a forecast pre-tax operating profit of $2 billion.

Life insurance premiums in the Asia-Pacific region are forecast to grow at a compound annual rate of 12. 3 percent between 2009 and 2014, Sigma Swiss Re estimates, compared with flat to modest growth in other parts of the world.

Still, the company faces a challenge with expanding in China, where the mainland’s top industry players dominate and more foreign competitors are flooding the market.

The IPO will value AIA at $30. 5 billion at the top end, with AIG holding a 41. 6 percent stake that would drop to 33 percent if it exercises an option to issue more shares.

“It’s more or less fully valued after the shares were sold at the top end,” said Francis Lun, general manager with Fulbright Securities. “Still, one could expect a 5 percent upside on debut. ”

AIA sold 5. 86 billion secondary shares and exercised the upsize option to sell an additional 1. 17 billion secondary.

Unlike many other foreign insurers, AIA has 100 percent ownership of entities in China, Indonesia, Malaysia, Thailand and Vietnam. AIA has more than 300,000 agents in Asia.

“This is a cost-effective way for IPO investors to ride China’s growth,” said Francis Gaskins, president of IPOdesktop.com in Marina del Rey, California.

Asian IPOs raised $90 billion in the first three quarters of 2010, more than double the total from the U. S. , Europe, the Middle East and Africa, according to Thomson Reuters.

Date October 23, 2010